While the UK government touts the benefits of CPTPP, it's important to acknowledge the potential downsides as well.
FACT 1: This FTA is at least as complex as any other, if not more complex
Free trade agreements bring advantages, but usually not complete freedom from customs duties, despite being called "Free". Certain groups of goods (e.g. agricultural products) are excluded from free trade, and the tariffs only decrease gradually over several years. This is also the case for the CPTTP. Also, please note that each FTA, signed between two or more nations, can provide for different rules of origin. Processes and procedures differ, too, and UK businesses must comply with these, too.
To give you the scale of such an undertaking, there are currently around 270 regional trade agreements in force that allow for free(er) trade between two or more countries. So it is fair to say that this FTA is at least as complex as the EU-UK TCA, if not more complex, due to the many countries taking part and all having exceptions, special provisions and unique tariff reduction schedules. Here, more than ever, the devil will be in the detail.
FACT 2: What CPTTP stands for, who is in it and how relevant it is
CPTTP stands for Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). It is a multinational trade agreement between
Australia,
Brunei,
Canada,
Chile,
Japan,
Malaysia,
Mexico,
New Zealand,
Peru,
Singapore, and
Vietnam.
It evolved from the Trans-Pacific Partnership (TPP), which never entered into force due to the withdrawal of the United States. The new Biden administration has indicated that it may rejoin the trade agreement in the future.
At the time of its signing, the CPTPP was the third-largest free-trade area in the world by GDP after the United States–Mexico–Canada Agreement and the European Single Market and possibly after 2020 signed Regional Comprehensive Economic Partnership.
FACT 3: The UK will be the second-largest participant in the CPTTP, exporting at least 1 Billion GBP to CPTPP member states.
The UK is the first non-founding country to apply to join the CPTPP. In 2024, the UK will become the second-largest CPTPP economy after Japan.
The UK exported at least £1 billion ($1.25 billion) worth of goods to CPTPP member countries. The UK government also highlighted that UK companies held close to £98 billion worth of investments in CPTPP countries in 2018[75] and that in 2019, the UK did more than £110 billion ($137 billion) worth of trade with countries in the CPTPP free trade area.
FACT 4: The UK has already signed FTAs with most CPTTP countries. UK businesses can choose which one to use
Once a member, there may be circumstances where your good has better tariff treatment under another FTA which the UK has with a CPTPP Party. For example, the UK has the following existing preferential trade agreements with Japan, Chile, Singapore, Vietnam and New Zealand (all CPTPP Parties), amongst others.
UK Businesses can then assess whether it is more advantageous to trade under the preferential CPTPP tariff rate, under the current MFN applied tariff or through a separate FTA that the UK has with the Party. Where the UK and a CPTPP Party are members of another FTA, unless the other FTA or the CPTPP say otherwise, it is a commercial decision for businesses to decide which agreement they will use. Importers and exporters have the option of selecting which agreement is best suited to them. To be eligible for tariff-free trade under the UK Free Trade Agreements (FTAs), it is imperative that businesses thoroughly review and understand the specific Rules of Origin for each FTA.
Top Tip: Compare the Rules of Origin of all UK FTAs with the Rules of Origin of CPTPP. UK: Access the Rules of Origin of all UK Free Trade Agreements: https://www.customsmanager.info/post/uk-access-the-rules-of-origin-of-all-uk-free-trade-agreements
FACT 5: Preferential trade is possible only if a UK business meets the provisions of the agreement, including rules of origin
UK exporters and importers wishing to use a future CPTTP need an understanding of the process for determining whether a good meets the CPTPP Rules of Origin and is eligible for preferential treatment under the CPTPP, along with all the other provisions of the agreement.
This means concretely that when trading under the CPTPP, it is up to the importing customs authority to assess whether the rules of origin, as evidenced by certification documentation held by the importer or the exporter, have been met. The CPTPP will have a system of advanced ruling to provide certainty on whether a good is eligible for preferential treatment under the TPP.
Top Tip
Access the rules of origin for CPTPP here:https://www.customsmanager.info/post/cptpp-unlocked-and-explained-rules-of-origin
More Information and Links
Unlocking the Benefits: CPTPP - Rules of Origin
In our new series covering the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership, CPTPP, we will break down all the relevant provisions of the Free Trade Agreement. Today, we will focus on Rules of Origin.
The Ultimate Guide to how to meet the Rules of Origin
Find out the rules to establish the country of origin of imported and exported goods and to help identify goods that qualify for lower or no customs duty.
Conclusion
The UK concluded negotiations to join the CPTPP on 31 March 2023 and signed the Protocol of Accession on 16 July 2023. The agreement will enter into force once the UK and CPTPP Parties have finished their legislative processes. We expect this to happen in the second half of 2024.
Businesses interested in trading with these countries may wish to familiarize them with the CPTTP text, processes and procedures. Contact Customs Manager Ltd. for more information and an informal chat about the opportunities.
More information & links
CPTPP: Membership perks for British Exporters !?!
Will the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) truly benefit British exporters? What are the UK CPTPP membership perks? We explore.
The Ultimate Guide on how to meet the Rules of Origin
Find out the rules to establish the country of origin of imported and exported goods and to help identify goods that qualify for lower or no customs duty
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